As home prices begin to fall, but still remain at near all-time highs, many homeowners are listing their properties to see if they can lock in some of the profit they’ve realized in the last few years.
But the problem many homeowners are finding is that their once hot properties aren’t as hot as they may have believed, and potential buyers are holding off while values drop even further.
Many banks and lenders enacted this rule because it doesn’t make much sense for a lender to provide financing or cash-out if a homeowner failed to sell their home on the open market, and then turns to the lender for an improved mortgage rate and cash in their pocket.
Think of it this way. Imagine you tried to sell a business and fell flat. If you then decided to take a loan out on it instead, a bank would likely be pretty weary. They’d want to know that it was worth what you say or think it’s worth.
Put simply, it just makes the whole endeavor seem a lot more risky, and it puts unwanted attention and scrutiny on you as a borrower.
So if you plan to sell your home, make sure you’re happy with your current mortgage rate and loan program, because if your home fails to sell, you’ll have a tough time finding a bank or lender that will refinance your home in the near future.
Even if you do happen to find a lender willing to work with you, their pricing might not be as good as other banks, which could still wind up costing you.